124 West Capitol, Suite 400 Little Rock, AR 72201 www.apers.org Arkansas Public Employees Retirement System APERS Member Handbook 2009 www.apers.org Contributory
This publication has been produced for use by members, staff and other interested persons for informal reference purposes only. The authors intend it to be accurate but whenever a statement herein conflicts with the law, the law shall prevail. ARKANSAS PUBLIC EMPLOYEES RETIREMENT SYSTEM 124 WEST CAPITOL, SUITE 400 LITTLE ROCK, AR 72201 (501) 682-7800 1-800-682-7377 www.apers.org OFFICE HOURS ARE 7:30 A.M. TO 4:30 P.M. MONDAY THROUGH FRIDAY The subject matter in this handbook is based on legislation. Therefore, at times technical language is unavoidable. Please consult the Glossary on Page 50 for defi nitions of words or terms you may not understand.
DISCLAIMER As much as possible, this brochure has been written in non-technical terms, avoiding the formal language of the retirement laws and rules. If questions of interpretation arise as a result of the attempt to make the retirement provisions easy to understand, Chapters 2, 4, and parts of 7 of Title 24 of the Arkansas Code Annotated (2005) must remain the final authority. The information provided in this handbook is based on the Arkansas Retirement System laws and rules in existence July 2005 and is subject to modification based on changes in the law. The information provided in this handbook is designed for members entering the Retirement System on or after July 1, 2005 as members of the Contributory System. If you were a member of the Non-Contributory system and returned to work as a Non- Contributory member, and you need a handbook, contact APERS at (501) 682-7800. Representatives from participating agencies are not agents of the Arkansas Public Employees Retirement System (APERS). APERS is not responsible for erroneous information provided by representatives of participating agencies. PLAN INFORMATION Name of Plan The (APERS). Type of Plan Administration And Service of Legal Process The is a defined benefit plan, qualified under Section 401(a) of the Internal Revenue Code, with defined contribution options. The APERS Board of Trustees through the Executive Director administers the Arkansas Public Employees Retirement System. Provisions of Law Funding CONTACTING THE SYSTEM The Arkansas Public Employees Retirement System (APERS) was established by Act 157 of 1957. Changes to the law can be made only by an act of the Arkansas Legislature. Members of the Arkansas Public Employees Retirement System (APERS) first hired on or after July 1, 2005 contribute 5% of their pre-tax salary to the System. Participating employers contribute a rate that is established annually by the APERS Board of Trustees. Monies received are invested by the System to pay future benefits to members, beneficiaries and survivors. Plan Year The plan year is July 1 through June 30. Employment Rights Not Implied Membership in the Arkansas Public Employees Retirement System does not give you the right to be retained in the employ of a participating employer, nor does it give you the right or claim to any benefit that you have not accrued under the System. When you write the System, please include your full name, printed and signed, your Social Security number, and complete mailing address. Address your correspondence to: 124 West Capitol, Suite 400 Little Rock, Arkansas 72201 Legal process may be served on: Gail H. Stone, Executive Director 124 West Capitol, Suite 400 Little Rock, AR 72201
TABLE OF CONTENTS Page TABLE OF CONTENTS Page Introduction 1 Letter From The Executive Director 6 Directions 8 APERS Board of Trustees 9 A Brief History 10 Membership 12 Costs and Investments 13 Contributions 14 Beneficiary Designation 15 Vesting 17 Free and Purchasable Service 18 Eligibility For Benefits 20 Death-in-Service Benefits 21 Disability Benefits 24 How To Calculate Monthly Benefits 40 How to Calculate your Final Average Salary (FAS) 41 Example of an Unreduced Benefit 42 Worksheet For Calculating an Unreduced Benefit (Using Your Own Figures) Reduced Benefits 44 Example of a Reduced Benefit 45 Retirement Checklist 46 A Reminder 47 Reference Sources 48 APERS Website 49 Glossary 50 Request For Benefit Estimate Form 54 43 Retiring From The Pension Plan 25 Retirement Benefit Options 27 Deferred Retirement Option Plan (DROP) 33 Partial Annuity Withdrawal (PAW) 35 After Retirement 37 General Information 39 4 5
June 30, 2009.. 124 West Capitol Suite 400 Little Rock, Arkansas 72201 Dear Member: Every successful relationship requires an ongoing partnership. While the employees of the (APERS) are committed to ensuring that your membership rights are guaranteed, you must also contribute to the partnership by meeting your responsibilities that include: Reviewing your annual benefit statement from APERS, and informing, in writing, a counselor of any incorrect information (i.e. name, date of birth, spouse, service, etc.). Reading the handbooks, newsletters and other information materials provided by APERS. Informing APERS if you have changes (i.e. address, family status -such as marriage, divorce, etc.-beneficiary, and so forth) even if you leave covered employment. Contacting our Office and asking the Counselors general questions if you don t understand your benefits so that you can make informed benefit choices. Sharing your benefit information with your family. The APERS Member Handbook has been prepared to meet one of our responsibilities to you keeping you informed about your retirement system, its benefits and policies, and your rights as a member. Membership in APERS is an important fringe benefit your employer provides to the employees. Members of APERS first hired on or after July 1, 2005 contribute 5% of their pre-tax salary into the System. Contributions earn 4% per annum. This Handbook provides general information about APERS and is intended to be a reference for you. It is supplemented by information posted on the APERS website (www.apers.org) and by newsletters and other information you will receive from us before and after retirement. A list of reference materials is on Page 48. Should you have specific questions or need additional information, please respond to us in writing at the address found at the front of this booklet. If you plan to visit, a map showing the location is on Page 8. Sincerely, Gail H. Stone Executive Director Our responsibilities to you as members in the partnership include: Administering retirement benefits to each eligible member of the. Providing handbooks, which contain information regarding your benefits. Keeping you informed of your benefit rights and options. Keeping you updated on legislative changes that affect your benefits. Providing individualized counseling when you request it either in written format or in an office visit. 6 7
Main Street Conway Map to the APERS Office 124 West Capitol, Suite 400 Little Rock, AR 72201 501-682-7800 or 1-800-683-7377 Jacksonville Note: Map Arkansas River = APERS = Parking Deck = One Way Streets I-430 I-430 not drawn to scale. Texarkana I-30 Little Rock I-630 Broadway Street I-40 Markham Street I-30 6 th I-40 Arkansas River I-30 Mrkhm.& Capitol Center 6 t h St. Ave. 4 th Louisiana St 2 n d St. Suggested Routes St. I-440 Exit Hwy 67-167 Con.Ctr. E xit Hwy. 1 Cantrell Rd. 0 Exit Hwy 65-167 To Memphis Arkansas River Pine Bluff From Texarkana - Take I-30 East to I-430 North, then I-430 North to I-630 East; take I-630 East to Center St. Exit; turn left on Center St. and go to 4th St.; turn right on 4th St. to Louisiana Ave.; turn right on Louisiana - get into far left lane - take left into valet parking deck. From Conway - Take I-40 East to I-430 South; take I-430 South to I-630 East; take I-630 East to Center St. Exit; turn left on Center St. to 4th St., then right on 4th St. to Louisiana Ave.; turn right on Louisiana, get into far left lane and turn into valet parking deck. From Memphis/Jacksonville - Take I-40 West to I-30 to Hwy. 10 Exit; take Hwy. 10 Exit to the Markham St./Convention Ctr. Exit; get onto 2nd St. West; stay on 2nd St. to Louisiana Ave.; turn left onto Louisiana and stay in left lane; take Louisiana to 4th St., cross 4th St. and take left turn into valet parking deck. From Pine Bluff/Airport - Take Hwy. 65-167 to I-440 to I-30; take I-30 to I-630 or 6th St.; take I-630 or 6th St. exit and go to Center St.; turn right on Center St., continue to 4th St.; turn right on 4th St. and go to Louisiana Ave.; turn right on Louisiana - get into the far left lane - take left into valet parking deck. Airport BOARD OF TRUSTEES Mr. Don Zimmerman, Chair Municipal Employee Representative Mr. Artee Williams, Vice Chair State Employee Representative The Honorable Martha Shoffner Ex-Officio, State Treasurer The Honorable Jim Wood Ex-Officio, State Auditor Mr. Richard Weiss Ex-Officio, Department of Finance & Administration Ms. Ouida Wright State Employee Representative Mr. Bill Gaddy State Employee Representative Mr. Maurice Henry School Employee Representative The Honorable Larry Fratesi County Employee Representative 8 9
A BRIEF HISTORY The was created by Act 177 of 1957. The System originally provided only for the retirement of State employees but through the years has added county employees (Act 42 of 1959), municipal employees (Act 64 of 1961), college and university employees (Act 149 of 1963), non-teaching public school employees (Act 63 of 1965), and other non-state employees (various Acts). Effective July 1, 1989 (Act 653 of 1989) all newly hired public school employees are enrolled in the Arkansas Teacher Retirement System. From 1957 through 1977, all APERS members participated in a contributory plan whereby employers and employees made contributions to the System. However, Act 793 of 1977 created a non-contributory retirement plan where only employers contribute. Anyone first enrolled in the System after January 1, 1978 was automatically placed in the non-contributory plan. As a result of Act 742 of 2001, any non-teaching public school district employee who is a member of APERS may have non-teaching service after July 1, 2001 covered under the Arkansas Teacher Retirement System (ATRS). This election can be made at any time; however, the enrollment period is only once a year. New employees of Arkansas state-supported universities, colleges, or junior colleges that are not a part of the University of Arkansas System are eligible to participate in their choice of retirement systems (i.e. APERS, ATRS, or an alternate retirement plan) (Act 765 of 2001). will be increased 0.5% for calculating the member s annuity. Thus, a Contributory member receiving credit at the current rate of 2.0% would see that multiplier increased to 2.5% for service beyond 28 years. Below is a list of some other significant retirement system legislation passed in the 87th Arkansas General Assembly of 2009: Act 295 broadened the ability of members to purchase retirement credit for service in the active duty military, National Guard or armed forces reserves. Vested members who are eligible for or currently receiving military retirement benefits may purchase up to five (5) years of service in APERS. Similarly vested members may purchase up to five years of military reserves time in the system. The act also invoked federal protections provided by the Uniformed Services Employment and Reemployment Rights Act (USERRA) for APERS members called to active duty. This act did not extend this purchasing option to retirees or members who have terminated service with an APERS-covered employer. Act 657 extended the time of separation from employment for retirement purposes from 30 days to 180 days. As of July 1, 2009, anyone returning to System covered employment before the 181st day will forfeit all benefits already paid. The act allows two exceptions: Members enrolled in the Deferred Retirement Option Plan (DROP) on Jan. 1, 2009, and members who retired and started receiving benefits between Jan. 1 and June 30, 2009, will still be permitted to return to work after the current 30-day period. Act 774 includes in APERS membership tipped food service workers of the Department of Parks and Tourism. As a result of Act 399 of 2003, anyone first hired on or after July 1, 2005, shall be a contributory member of APERS and contribute 5% of their pre-tax earnings to the System. The enactment of Act 220 of 2007 raised the Contributory multiplier to 2.03% for APERS service from July 1, 2005 through June 30, 2007. After June 30, 2007, credited service is again calculated with the 2.0% multiplier. Act 1200 of 2009 stated that for each year of service over 28 years rendered on or after July 1, 2009, a Contributory member s multiplier 10 11
MEMBERSHIP Membership in the (APERS) is compulsory if you are hired with the intent of working at least 90 consecutive calendar days, work at least 80 hours per month and earn at least the federal minimum wage. In addition, APERS sends to you an annual statement reflecting your earnings and contributions, if any, for the year. This statement is prepared for active members only. The information for the annual statements is compiled at the close of each fiscal year (June 30) for that fiscal year (July 1 June 30) and the statements are sent to your home address during the next fiscal year. Q. May employees of public groups other than the State participate? A. Yes, counties and state-supported colleges and universities are required by law to be participants. Municipalities, including commissions and boards of municipalities, and other Non-State employers, may elect to become APERS participants. Public Schools participate for only certain non-teaching employees hired before July 1, 1989. From and after that date, under Act 653 of 1989, new school employees will be included in the membership of the Arkansas Teacher Retirement System. Q. Do I have a choice in becoming an APERS member? A. No. You must join as a condition of your employment unless you are already retired and receiving a benefit from APERS. Q. Are there any age limits on becoming a member of the System? A. No. Q. Is counseling available? A. Yes. You may call us for an appointment. We are located on the fourth floor of 124 West Capitol, Suite 400, Little Rock, Arkansas 72201 and our telephone number is (501) 682-7800 or 1-800-682-7377 if you are outside the Little Rock area. Q. How may a member obtain information about his/her record? A. Although general information about the System can be given over the telephone, for your protection, only a written request or a visit to our office can obtain specific information about your record. Benefit estimates are prepared for members who are within one (1) year of anticipated retirement. A request for a specific date does not bind you to retirement on that date. Dual Membership If you work at the same time for two or more employers that are covered by different state sponsored retirement systems, you can t be a member of both systems. You can only be a member of one system. The exception being members of the General Assembly, volunteer firefighters and those persons who have dual full-time employment in separate positions covered by the and the Arkansas Local Police and Fire Retirement System respectively. However, if you are employed in two or more positions that are covered by APERS and meet the eligibility requirements, you must be reported by both employers to APERS. COSTS AND INVESTMENTS Q. Who determines the cost of benefits? A. A professional Actuarial firm, selected by the Board of Trustees, makes an annual actuarial valuation of the System, and recommends an amount to be paid by the employers and employees. Q. Who invests our money? A. The Board of Trustees of the Arkansas Public Employees Retirement System has full power to invest and re-invest all funds. The Board employs professional money management firms to manage the investment portfolio. Q. How safe are our contributions? A. Investments are made under the Prudent Investor Rule. This rule states that in making investments one exercises the judgement and care, under the circumstances then prevailing, which an institutional investor of ordinary prudence, discretion, and intelligence exercises in the management of large investments entrusted to it, not in regard to speculation but in regard to the permanent disposition of 12 13
funds, considering probable safety of capital as well as probable income. (The Federal Employee Retirement Income Security Act of 1974). CONTRIBUTIONS The (APERS) is a multiemployer defined benefit plan in which employees as well as their employer contribute. In other words, you must pay a portion of your salary (pre-tax) into the System in order to earn service credit toward a future retirement benefit. The contributions are deducted from your salary by your employer to pay for your retirement. These contributions will remain on deposit in your name unless you leave your job and receive a refund of your contributions. These contributions are invested by professional money management firms hired by the Board of Trustees. In turn, for your contributions to the System, at retirement your benefit will be based on a specific multiplier established in the law. Your employer pays retirement contributions equal to a certain percentage of your salary each month. These rates are subject to change by the APERS Board of Trustees. Refund of Contributions You may have employee contributions in the System if: 1. You were a member of APERS on or before January 1, 1978 2. You are a member first hired after July 1, 2005 3. You purchased service in the System You may request a refund of your personal contributions if you terminate all covered employment. Your refund will not include contributions made by your employer. Employer paid contributions are not refundable. You will retain all service credit funded solely by employer paid contributions. Q. What happens to the money the member contributes? A. All contributions are invested in compliance with the Prudent Investor Rule. Q. Does an employee earn interest on his/her contributions? A. Yes, interest is earned at the rate of 4% per year. BENEFICIARY DESIGNATION At the time of enrollment, you must designate a beneficiary to receive your accumulated contributions in the event of your death before retirement by completing a Designation of Beneficiary Form. Before You Retire In the event of your death before retirement, you may name as beneficiary any person. You may state that your beneficiaries share jointly or sequentially. If you did not name a beneficiary or if your beneficiary has died, any benefits due upon your death will be paid according to state law. Your spouse at the time of your death will automatically be your beneficiary unless you name a different beneficiary. You may change your beneficiary at any time. This is important to remember if your beneficiary dies, your marital status changes, or you have additional children. Q. Are there restrictions regarding the person or persons I may name as beneficiary? A. No. For example, it could be your spouse, child(ren), relative, or friend. To apply for a refund of your contributions, contact us. However, you may lose all retirement credit for your refunded service. If you return to covered employment for at least 90 consecutive calendar days and three (3) consecutive months service credit, you may be eligible to repay the refund and restore the refunded service. Q. Is there a circumstance in which my spouse automatically becomes my beneficiary even if I have named another person? A. Yes. See Death-In-Service Benefits on Pages 21-23. Q. May I change my beneficiary at any time, and if so, how? A. Yes, by filling out a Change of Beneficiary Form that is 14 15
available at the Office, or on the website at www.apers.org. When You Retire Q. May I change my beneficiary at any time, and if so, how? A. No. Once retired, only as specified above. VESTING On your application for retirement, you will be asked to name your beneficiary if you choose a benefit option other than Straight Life. - If you choose Option A-60 or A-120, you may name one or more contingent beneficiaries to receive any benefits remaining at your death. - If you choose Option B-50 or B-75, the beneficiary must be your spouse to whom you have been married for at least one year or a dependent who is at least 40 years of age. After You Retire If you elect Straight Life or one of the A-Options (Option A-120 or Option A-60) and you marry after retirement or within one year preceding retirement, you may elect to cancel your Straight Life Option or Option A-120 or Option A-60 and elect Option B-50 or Option B-75 providing continuing lifetime benefits to your spouse. This election, however, must be on a form approved by the System and received by the System no earlier than one year after the date of the marriage and no later than 18 months after such date. If you elect one of the B-Options (Option B-50 or Option B-75) and you have a change of marital status through either death or divorce you may elect a new option. (See Retirement Benefit Options information on Pages 26-29). Q. Is there any restriction regarding the person or persons I may name as beneficiary? A. Yes. It must be your spouse. Q. Is there a circumstance in which my spouse automatically becomes my beneficiary even if I have named another person? A. Yes. See Death-In-Service Benefits on Pages 21-23. Being vested means that you are eligible to receive a future retirement benefit. You will be vested under the Arkansas Public Employees Retirement System after completing five (5) years of service. Q. When am I vested? A. You are vested when you have the minimum service credit required to be eligible for a future benefit. Act 1356 of 1995 lowered the number of years required to be vested from 10 to 5. Reciprocal Service Reciprocal service is service in two or more systems that is utilized to determine eligibility for benefits in those systems. Service credit in other State sponsored retirement systems may be utilized to determine if you are vested. Q. May I transfer service credit from another Arkansas retirement system Arkansas Teacher Retirement System, the Arkansas Highway Employees Retirement System, the Arkansas State Police Retirement System, the Arkansas Judicial Retirement System, or the Arkansas Local Police and Fire Retirement System? A. No. You may not transfer service credit. However, you may use the service credit toward becoming vested. Act 611 of 1975, as amended, provides for Reciprocal Service credits between six state Retirement Systems - the Arkansas Public Employees Retirement System, the Arkansas Teacher Retirement System, the Arkansas Highway Employees Retirement System, the Arkansas State Police Retirement System, the Arkansas Judicial Retirement System, the Arkansas Local Police and Fire Retirement System and certain alternate plans as specified by Act 857 of 1997. If you left a position covered by one of the Arkansas retirement systems listed above and became a member of another one of the 16 17
retirement systems listed above, you may be entitled to an annuity from each system subject to certain conditions. Such may be the case, even if you have received a refund of contributions from the first system (if you have re-established the service). The date your annuity becomes payable by each system will be determined by the laws and regulations in force for each system. In no case will an APERS annuity become payable nor be paid to you prior to the date you retire from an agency covered by APERS. For additional information, contact the retirement systems involved. If you are employed by a participating employer of APERS (the state, county, a participating municipality, public school, college or university, or a participating non-state public entity) and you leave your job to become employed by another APERS participant, there is no need to apply for reciprocal service credit because you are still a member of the same retirement system. FREE AND PURCHASABLE SERVICE In addition to the service that you have credited to your account, other credited service may be available to you. Some credited service is available to you at no cost and some may be purchased. The categories of service for which you may be eligible include repayment of a refund, military service (which may include either free credit, or purchase of active duty credit, National Guard, or Armed Forces Reserve credit), and other service. Purchases of service may be made with a rollover from another retirement plan. Repayment of a refund If you received a refund from the Arkansas Public Employees Retirement System and have now returned to work for an APERS employer or an employer in a reciprocal system, you may repay your refund and re-establish the credited service forfeited when you received the refund by paying into your account the amount withdrawn with regular compounded interest from the date withdrawn to the date repaid. You must, however, be re-employed for a period of 90 days and have worked at least 80 hours per month and have three (3) months service credit before you may repay the refund. A partial-pay plan is available if the total cost to repay is more than $500. If the cost of the refund is less than $500, the refund must be repaid in one lump sum payment. Military Service 1. Free Military Service If your service to a public employer was interrupted for service in the Armed Forces of the United States during a national emergency and you returned to work for a public employer within six years after your discharge, you may receive free service credit for your active military duty, provided that no more than five years of military service may be claimed. Disclaimer: This is not to be confused with active duty service in the Guard or the Reserves guaranteed by USERRA laws. 2. Purchasable Military Service Active Military Duty Act 295 of 2009 allows members of APERS who are receiving federal military service retirement to purchase credited service for service rendered in the armed forces. You may purchase anywhere from one month to five years of active duty military time if you: a) have 5 years of actual service credited to the Retirement System; and b) have received an honorable discharge. Arkansas National Guard or Armed Forces Reserve Act 295 of 2009 allows current APERS members to purchase one year of credited service in APERS for one year of service in the National Guard or Armed Forces Reserves. Act 295 also increased the allowable total purchase from three (3) years to five (5) years. No APERS member may purchase more than 5 years of total credited service from any accepted source (active duty military, National Guard or military reserves, federal, etc.) The following conditions must be met: a) The person must be an active member of APERS on the date of purchase with at least 5 years of actual service credit; b) The member must furnish proof of service with an acceptable document, either a DD-Form 214 for Armed Forces Reserve duty, or an NGB Form 22 for National Guard service. 18 19
In compliance with Act 295 of 2009, APERS Board Regulation 411 permits a member seeking to purchase National Guard service or Armed Forces Reserve service to purchase such service in monthly increments up to the maximum amount of credited service authorized by Act 295 of 2009. The cost of the service is based on the current rate of employee contributions, if applicable, and employer contributions in effect at the time of the purchase and is calculated times the greater of: a) The last full fiscal year salary of the member, or b) The final average salary calculated for the date of purchase. Interest of 6% is calculated from the end of the most recent fiscal year (June 30) to the date of purchase. 1) age 65 with 5 actual years of service credited in the System(s); or 2) at least 55 years of age with 35 credited years of service in the System(s) as an elected or public safety member; or 3) any age with 28 actual years of service in the System(s). For an explanation of actual and credited service, see the Glossary, Page 50. Q. What if I decide to work beyond 28 years without retiring? A. Act 1200 of 2009 established that for each year a member works beyond their 28th year of employment, the retirement multiplier used to calculate service credit beyond 28 years will be increased by 0.5%. Other Service There are other types of service that may be purchased. These include: (1) Educational leave time; (2) Time lost due to Worker s Compensation Injury; (3) Service where the person was paid by a federal grant; (4) service with a non-participating municipality; 5) out-of-state public employment; and (6) federal public employment. Please contact APERS for specific information. To purchase prior service credit, you must pay all contributions - employee and employer- at the employer normal cost, together with interest per annum, compounded annually from the date the service was rendered until the date of payment. In addition, in most cases, you must have five years of current service to be eligible to make the purchase and be an active member of APERS or a reciprocal System. Please contact APERS for specific information. ELIGIBILITY FOR BENEFITS Once you are vested and meet the age and/or service requirements, you may be eligible for an unreduced or reduced benefit from the System. Unreduced Retirement Q. When am I eligible for an unreduced retirement benefit? A. Under the contributory plan, a member is eligible for unreduced benefits at: Reduced Retirement Q. When am I eligible for a reduced benefit if I have at least 25 years of actual service? A. With at least 25 years of actual service, an active member is eligible for a reduced benefit at any age. Q. What is the reduction? A. The reduction is taken from either age 65 or 28 years of service whichever is less. If 28 years is used, the reduction is 1% for each month away from 28 years of service. If age 65 is used, the reduction is ½ of 1% for each month away from age 65. Q. If I have less than 25 years of service, can I take a reduced benefit? A. Yes. Benefits are reduced ½ of 1% for each month early that you retire prior to age 65 with less than 28 years service. However, you may not retire more than 10 years prior to your normal retirement age. You may not retire before age 55 with less than 28 years of service. See Reduced Benefits and Example of a Reduced Contributory Benefit, Pages 44-45. Active/Deferred Member DEATH-IN-SERVICE BENEFITS If you are vested and die while an active member, death-in-service benefits may be payable to your survivors. This benefit is also payable if you have 20 21
applied for retirement benefits but die before the effective date of your benefits. Q. If I die in service, under what circumstances will my survivor (mother, father, husband, wife, children) receive a monthly benefit? A. In order for any survivor to receive monthly benefits, you must have had five years of actual service. Surviving Spouse must have been married to you for at least one year preceding your death. The surviving spouse s monthly benefit will be the greater of Option B-75 or 10% of your covered compensation. In all cases: A spouse annuity will be at least 10% of your covered compensation at the time of death. In the event your spouse remarries, a spousal annuity will be payable as long as your surviving spouse has in his/her care any of your dependent children receiving a benefit. Surviving Children If you die in service and have: 1) One or two dependent children each child will receive an annuity of the greater of: a) 10% of your covered compensation at the time of death; or b) An equal share of the $150 monthly minimum. 2) Three or more dependent children each child will receive an equal share of the greater of: a) 25% of your covered compensation at the time of death; or shall be extended as long as the child continues uninterrupted as a full-time student at an accredited secondary school or college or university, but in no event beyond his/her attainment of age 23. Also, the age 18 maximum will be extended for any child who has been deemed physically or mentally incompetent by an Arkansas Court of competent jurisdiction for as long as such incompetence exists. When a child ceases being a dependent child, his/her annuity will terminate and there will be a re-determination of the amounts payable to any remaining dependent children. If, at the time of your death, there is neither a spouse nor a dependent child, each parent dependent upon you for at least ½ support will receive an annuity of the greater of: 1) 10% of your covered compensation at the time of death; or 2) An equal share of the $150 monthly minimum. NOTE: If you die in service your surviving spouse, who is also your named beneficiary, may opt to receive a monthly benefit or a lump sum refund if you have no dependent children. Q. If I am a deferred vested member not receiving benefits and die, are my survivors eligible for a benefit? A. Yes, a death benefit may be payable to your survivors. Retired Member The option chosen at retirement will dictate what benefits are paid to a retired member s survivors. If the Straight Life Option is chosen and the member dies before receiving twelve (12) monthly retirement payments and has a surviving spouse, the spouse is eligible for an Option B-75 benefit for his/her lifetime. If there is no spouse, the remaining contributions and interest not received in the benefit payments will be payable to the named beneficiary. b) An equal share of the $150 monthly minimum. A child will be a dependent child until his/her death or his/her marriage or his/her attainment of age 18, whichever occurs first. The age 18 maximum If one of the A-Options was chosen at retirement and if the retirant s death occurs before receiving the specified payments, the named beneficiary shall be paid the remainder of the months to total the specified payments. 22 23
If one of the B-Options was chosen at retirement, the retirant s spouse will be eligible for lifetime benefits based on the option chosen. A Reminder to Death-In-Service Recipients.. If you are receiving a death-in-service benefit check from APERS and you marry or re-marry, you should notify our office immediately. DISABILITY BENEFITS To qualify for disability retirement under the Arkansas Public Employees Retirement System (APERS), you must be totally and permanently disabled from performing any useful and efficient service as an officer or employee. If you are in the Deferred Retirement Option Plan or eligible for an unreduced benefit, you are not eligible for disability benefits. Disability benefits are not reduced for early retirement. Q. If I become disabled, may I receive benefits from the System? A. Yes. If you have at least 5 years of actual service credited in the System and you become disabled, you may apply for disability retirement benefits. Q. What is required to qualify for disability retirement benefits? A. To qualify for disability with the Arkansas Public Employees Retirement System you must be found eligible for Federal Social Security Disability Benefits because you are totally and permanently disabled. In the event you are not approved by the Social Security Administration (SSA) you may, after appealing through the Administrative Law Judge level of SSA, appeal to the APERS Board of Trustees. In addition, you must have at least 5 years of actual service and at least 18 of the 24 months of service immediately preceding occurrence of disability. Although Social Security has a five-month waiting period, you should file for disability with APERS immediately. If you are approved for disability benefits by the Social Security Administration, you will receive benefits from APERS retroactive to the first of the month following the later of your termination date or disability onset date. Q. Is there an appeal if I don t meet the 18 of the 24 months of service immediately preceding occurrence of disability requirement? A. Any former member who is or was approved for disability by the Social Security Administration but whose onset date does not meet the provision that requires credited service for eighteen (18) of the twenty-four (24) months immediately preceding the disability, may be retired by the board upon written application to the Board providing that the onset date determined by the Social Security Administration is within twenty-four (24) months of the date of termination from covered employment. Q. Can I begin receiving reduced benefits pending approval of disability? A. Yes. If you are within ten (10) years of your normal retirement age (for most members that is at least 55 years of age) you may receive reduced benefits pending approval of your disability. If approved for disability, your full benefits will be paid retroactive to the effective date. Q. Can I return to work for an APERS covered employer? A. No. Q. Can I return to work and continue receiving APERS disability benefits? A. You can t return to work for an APERS covered employer without jeopardizing your disability benefit. However, you can return to work for a private employer providing you do not exceed the Social Security monthly limitation. Q. Who should I contact if I plan to return to employment? A. If you are planning to return to work, please contact the Benefits Unit prior to making your decision. RETIRING FROM THE PENSION PLAN Many issues should be considered as you approach retirement. What retirement income should you expect? Do you qualify for normal retirement and, if not, should you consider early retirement? What about the Deferred Retirement Option Plan? What about the Partial Annuity Withdrawal Plan? Once you decide what you want to do, how and when do you apply? 24 25
Benefit Estimates Effective Retirement Date Q. Is there a compulsory age at which I must retire? A. No. Q. How would I get a benefit estimate? A. If you are within one year of retirement and/or participation in the Deferred Retirement Option Plan (DROP), provide the Counseling staff with a written request that includes your name, Social Security number, mailing address, and effective date. We must have an effective date in order to provide you with an estimate. This estimate in no way obligates you to retire on that date. This information is confidential and is not provided to anyone but you. Q. How can I get benefit information for more than a year prior to retirement? A. Retirement Counselors prepare benefit estimates if you are within one year of retirement and/or participation in the Deferred Retirement Option Plan (DROP). Termination However, you may access the Benefit Calculator on our web page at www.apers.org and perform any number of what-if scenarios. You must terminate employment to be eligible to receive monthly benefits. You are considered terminated only after you end all employment relationships with all APERS covered employers for 180 days (effective July 1, 2009). Returning to an APERS covered employer prior to 180 days will void your retirement. Act 657 of 2009 mandated an extension of the period of separation from employment for retirement from 30 days to 180 days. Effective July 1, 2009, any member returning to covered employment before the 181st day will forfeit all benefits paid to them. Your effective retirement date is always the first day of the month your retirement begins. If we receive your application forms before you terminate employment or within 30 days of the effective date of retirement, your effective retirement date will be the first day of the month following your termination. Application For Benefits You must apply for retirement benefits before you can begin receiving benefit payments. To apply, request and complete the necessary forms in the Retirement Application Packet. These forms are available from the System Office. Q. Is there any particular time when I should file an application for retirement benefits? A. Yes. The application must be on file not more than 90 days, and not less than 30 days, prior to the effective date of retirement, which is the first day of the month. For example, if your retirement is to be effective June 1, your application must be received in the office of the during the months of March or April. You alone are responsible for ensuring that the necessary papers get to the Retirement System. RETIREMENT BENEFIT OPTIONS At the time that you retire (i.e. normal, disability, etc.) or enter the Deferred Retirement Option Plan (DROP), you have certain benefit options available to you. You must choose one of the options when you file your DROP Application or Retirement application. In the event of your death, your spouse and/or your beneficiary is not eligible to receive your Temporary Annuity if you were receiving one. 1. Straight Life: Monthly benefits will be paid for your lifetime only. Upon your death, your beneficiary, as indicated by our records, will receive, in a lump-sum, any balance of your accumulated employee contributions not paid to you in the form of monthly annuity payments, or if you die within twelve (12) months of the effective date of retirement, a B-75 Option annuity may be payable, upon application, to your surviving spouse. 26 27
2. A-Options: Under the A-Options, monthly benefits are payable to you for your lifetime. If you die before receiving a set number of monthly benefits, your beneficiary will receive the remaining monthly benefits. a) Option A-120: You receive 94% of the computed straight life annuity. This monthly benefit is payable to you for your lifetime. In the event of your death before you have received 120 monthly payments, your beneficiary is entitled to the same annuity, less the temporary benefit, if applicable, for the balance of the 120 months. For example, if your straight life annuity would be $200.00 per month, under Option A-120 you would receive a monthly benefit of $188.00 (94% x $200.00) for your lifetime. If you received 100 of the 120 monthly payments and you die, your beneficiary will receive the remaining 20 monthly payments. b) Option A-60: You receive 98% of the computed straight life annuity. This monthly benefit is payable to you for your lifetime. In the event of your death before you have received the 60 monthly payments, your beneficiary is entitled to the same annuity, less the temporary benefit, if applicable, for the balance of the 60 months. For example, if your straight life annuity would be $200.00 a month, under Option A-60, you would receive a monthly benefit of $196.00 (98% x $200.00) for your lifetime. If you have received 55 of the 60 monthly payments and you die, your beneficiary will receive the remaining five monthly payments. For the A-Options, your beneficiary may be anyone you choose. In the case of multiple beneficiaries, the benefit will be shared equally by each. 3. B-Options: Under the B-Options, monthly benefits are payable to you for your lifetime. In the event of your death, a percentage of your monthly benefit is payable to your beneficiary for his/her lifetime. a) Option B-50: You receive 88% (adjusted upward or downward for the difference in age between yourself and your beneficiary)* of the computed straight life annuity. This monthly benefit is payable to you for your lifetime. Upon your death, ½ of the monthly benefit, which you were receiving, less the temporary benefit, if applicable, will be paid to your beneficiary for his/her lifetime. *Your monthly benefit is adjusted by ½ of 1% for each year difference in age between yourself and your beneficiary. If your beneficiary is older than you, your monthly benefit will be increased. (The benefit, however, cannot be raised to more than 95%). If your beneficiary is younger than you, your monthly benefit will be decreased. For example, if your straight life annuity would be $200.00 a month, under Option B-50 you would receive a monthly benefit of $176.00 (88% x $200.00) for your lifetime assuming that your beneficiary is the same age. However, if, for example, your beneficiary is six years older than you, your monthly benefit would be increased by 3% (1/2 x 1% x 6 years) and your monthly benefit would be 91% of $200.00 or $182.00. However, if, for example, your beneficiary is 10 years younger than you, your monthly benefit would be decreased by 5% (1/2 x 1% x 10 years) and your monthly benefit would be 83% of $200.00 or $166.00. Upon your death, your beneficiary will receive for his/her lifetime 1/2 of your monthly benefit. Therefore, if you were receiving $176.00, your beneficiary would receive $88.00. If you were receiving $182.00, your beneficiary would receive $91.00. And, if you were receiving $166.00, your beneficiary would receive $83.00. b) Option B-75: You receive 83% (adjusted upward or downward for the difference in age between yourself and your beneficiary)** of the computed straight life annuity. This monthly benefit is payable to you for your lifetime. Upon your death, 3/4 of the monthly benefit, which you were receiving, less the temporary benefit, if applicable, will be paid to your beneficiary for his/her lifetime. **Your monthly benefit is adjusted by 7/10 of 1% for each year difference in age between yourself and your beneficiary. If your beneficiary is older than you, your monthly benefit will be increased. (The benefit, however, 28 29
cannot be raised to more than 90%). If your beneficiary is younger than you, your monthly benefit will be decreased. For example, if your straight life annuity would be $200.00 a month, under Option B-75 you would receive a monthly benefit of $166.00 (83% x $200.00) for your lifetime assuming that your beneficiary is the same age. However, if, for example, your beneficiary is six years older than you, your monthly benefit would be increased by 4.2% (7/10 x 1% x 6 years) and your monthly benefit would be 87.2% of $200.00 or $174.40. However, if, for example, your beneficiary is 10 years younger than you, your monthly benefit would be decreased by 7% (7/10 x 1% x 10 years) and your monthly benefit would be 76% of $200.00 or $152.00. Upon your death, your beneficiary will receive for his/her lifetime 3/4 of your monthly benefit, less the temporary benefit, if applicable. Therefore, if you were receiving $166.00, your beneficiary would receive $125.00. And, if you were receiving $174.00, your beneficiary would receive $131.00. And, if you were receiving 152.00, your beneficiary would receive 114.00. For the B-Options your beneficiary must be either your spouse (to whom you have been married for at least one year) or a person 40 years of age or older to whom you contribute more than ½ of his/her support. Q. May I change the benefit plan elected at retirement? A. Yes, under certain circumstances. 1) If you elect Straight Life or one of the A-Options (Option A-120 or Option A-60) and you marry after retirement or within one year immediately preceding retirement, you may elect to cancel your Straight Life Option or Option A-120 or Option A-60 and elect Option B-50 or Option B-75 providing continuing lifetime benefits to your spouse. This election, however, must be on a form approved by the System and received by the System no earlier than one year after the date of the marriage and no later than 18 months after such date. 2) If you elect one of the B-Options (Option B-50 or Option B-75) and you have a change of marital status through either death or divorce you may elect a new option. Proof of Age When you apply for retirement, you must furnish proof of your age. If you choose benefit Option B-50 or B-75, you must also furnish proof of age for your spouse/beneficiary as well as a copy of your marriage license. APERS must receive the required proof of age before you begin receiving benefits. We will accept a readable copy of one of the following documents: 1. Birth certificate issued at date of birth. 2. Birth certificate issued at any date before age 5 when certified by the appropriate administering agency. 3. Baptismal or other church records issued before age 5. 4. U. S. Census Report issued 1950 or before. 5. Social Security document other than application for Social Security number that states age or date of birth recognized by SSA. If you can t furnish any documents listed above, a readable copy of a document from two of the following categories will be required: 1. Marriage license (must show age or date of birth). 2. Insurance policy issued at least 10 years prior to current date. 3. Records from family Bible. 4. Military discharge. 5. Child s birth certificate. 6. Application for Social Security number. 7. Birth certificate issued at date when person was older than age 5 when certified by the appropriate administering agency. Limitation of Benefits State and federal laws limit the amount of your annual benefit. Under the (APERS), your initial retirement benefit may not exceed 100 percent of your final average compensation. However, this restriction does not apply to supplemental retirement benefits like deferred compensation or to pension increases resulting from cost-of-living adjustments, nor does it apply to benefits accruing under the DROP. 30 31
Q. If I am a member of the contributory plan, is it possible for me to receive more money in retirement from APERS than I did in employment? A. No. Benefits paid shall not exceed the limitations of Section 415 of the Internal Revenue Code. Retirement Benefit Payments Q. How are payments made for benefits? A. All benefit payments are made monthly by the Retirement System. All new retirees will be required to receive their benefit payment deposited electronically directly into their bank account (direct deposit ensures that your benefit will not be late because of delays in mail delivery, or due to a lost or stolen warrant). Q. What do I need to do to have my benefit payment deposited electronically directly into my bank account? A. The Direct Deposit Form is included as part of the Retirement Application packet. This form should be completed by you and your financial institution and returned to APERS for processing. If you are already receiving a benefit, contact the Communications Unit of this Office who will provide you with the necessary forms and instructions. Q. When are benefit payments distributed? A. Benefit payments in the form of warrants are mailed on the last working day of each month. Benefit payments, which are deposited electronically into your bank account, are deposited on the first working day of each month. If the first day of the month falls on the weekend or a holiday, your payment will be made on the next working day. All benefit payments represent payment in advance for the month in which received. Q. Is my monthly retirement benefit taxable? A. Act 27 of 1989 requires that State Income Tax be paid on all but the first $6,000 of retirement income from employer sponsored pension plans. To determine if your benefits are taxable by the Federal Government, check with the Internal Revenue Service or your tax consultant. Q. Will you withhold tax from my retirement check at my request? A. Yes. At the Retiree s request, APERS will withhold both federal and state income tax. Q. Will you send me a report of retirement benefits received? A. Yes. Each year we mail to you a Form 1099-R, Statement for Recipients of Annuities, Pensions or Retired Pay, showing retirement benefits paid to you the past calendar year. (It is very important to keep your mailing address current with the Retirement System). DEFERRED RETIREMENT OPTION PLAN (DROP) The Deferred Retirement Option Plan (DROP), is a plan which allows you to retire and begin accumulating a percentage of your retirement benefits, without terminating employment, for up to 84 months from the date you first entered the DROP. While participating in DROP, your monthly retirement benefits remain in the APERS Trust Fund, earning tax-deferred interest, while you continue to work (but you do not earn additional service credit for retirement). When the DROP period ends, you must terminate all covered employment with APERS employers. At that time, you will receive payment of the accumulated DROP benefits, and begin receiving your monthly retirement benefit (in the same amount as determined when you entered the DROP, plus annual cost-of-living increases and any Ad Hoc increases). Q. Who is eligible to participate? A. Any member of APERS who has at least 28 years actual service. Service in a reciprocal system can be counted. Q. Can I use reciprocal service in another System to be eligible? A. Yes. Q. How is my DROP benefit computed? A. The DROP benefit amount with at least 30 years of actual service is currently 75% of your benefit amount (i.e. straight life, A-60 Option, etc.). If you have at least 28 but less than 30 years of actual service, your contribution percentage is 75% less ½ of 1% for each month that you are away from 30 years of service. 32 33
Q. How much interest will I earn? A. The interest rate to be credited to the DROP account at the conclusion of each fiscal year will be 6%; this rate is subject to change. If a participant does not have contributions to his/her account for all twelve months during the fiscal year, then the interest shall be pro-rated based on the number of months of participation and the balance for those months. Q. What is the deadline for applying for the DROP? A. The DROP application must be completed in its entirety and submitted to this Office no later than the last working day of the second month prior to the effective participation date. DROP applications are accepted as early as three months prior to the effective date of participation. Q. How is the DROP paid to me when I retire? A. Your DROP payment can be paid in a lump sum to you, rolled over into an IRA or be paid to you in the form of an additional monthly benefit. You may also take part of the amount in a lump sum and roll the remainder over into a qualified retirement plan(s). Q. What are the taxes on the lump-sum payment? A. Twenty percent (20%) is withheld for federal taxes and five percent (5%) for state taxes. Q. What are the requirements to leave the DROP and begin my retirement benefits? A. You must terminate covered employment within seven years of the effective date of participation in the DROP. A participant who does not terminate covered employment within seven years of the effective date of participation shall forfeit the balance in the DROP account. There is no minimum participation time frame. NOTE: You must file a regular retirement application before you terminate and complete a DROP Distribution form. Q. At the time of retirement, can I change the Option I selected when I enrolled in the DROP? A. No. The Option you chose when you entered the DROP is the same one you will receive when you retire. If your marital status changes while participating in the DROP you should contact the Retirement Section for additional information. Q. What happens to my account if I die while in the DROP? A. The deceased DROP participant s benefits may or may not be recalculated, depending on the Benefit Option chosen when the member entered the DROP. Annuities will be paid to eligible survivors and/or designated beneficiaries. Q. Can I change jobs and remain in the DROP? A. A participant who changes APERS covered employment within the seven year period may continue to participate in the DROP provided the participant remains on the payroll of a covered employer without interruption. The participant shall notify APERS in advance of any changes of employment. Q. How much service must I have to receive the monthly DROP amount? A. An employee must work or be paid the equivalent of 80 hours each month. The exception being the public school employees, who must work at least ½ of the hours required for their position. Q. What happens if I am called to active duty while participating in the DROP? A. The member should contact APERS in writing regarding their own specific circumstances. Generally, the member should provide APERS with a copy of his/her Orders at the onset of active duty as well as at the end of their tour of duty. The employer will continue to report the DROP participant on the monthly DROP Report and the member will continue to accrue their monthly amount up to the maximum allowed time frame. Q. Can I access my DROP information online? A. You can access your DROP information online by going to our website (www.apers.org) and choosing DROP Account Access from the navigation links found on the home page. PARTIAL ANNUITY WITHDRAWAL (PAW) The Partial Annuity Withdrawal is a retirement option that allows a member who works beyond the date s/he was eligible for an unreduced benefit to take a lump sum distribution of up to 60 months of his/her retirement benefit. The monthly lifetime annuity is reduced by an actuarial factor tied to the age of the retiree at retirement. 34 35
Q. Who is eligible to participate in the PAW? A. Any active member of APERS who works beyond the date that he or she would have been eligible for an unreduced benefit and who hasn t participated in the Deferred Retirement Option Plan (DROP). Q. Can I use reciprocal service in another System to be eligible for PAW? A. Yes. Only the actual service in APERS after the date you became eligible for an unreduced benefit will be used in the calculation of your PAW. Q. Can I participate in the DROP and the PAW? A. No. Q. Are fractional months included in the calculation of the PAW? A. No; only whole months are used in the calculation of the PAW. Q. How is my PAW benefit computed? A. Based on your computed monthly benefit, you are eligible to receive from one to sixty months of your benefit in a lump sum. The number of months that you are eligible is based on the number of months you have worked past the date you became eligible for an unreduced benefit. Q. When do I elect to participate in the PAW? A. The choice is made at the time you complete your retirement application. Specific forms to participate in the PAW are included in the retirement packet. Q. How is the PAW amount paid when I retire? A. Your PAW payment can be paid to you in a lump sum or rolled over into an IRA. You may also take a partial lump sum and roll the remainder over into an IRA. Q. What forms must be completed for the PAW to be distributed to me? A. In addition to the retirement application, the member must complete the PAW Election Form and the applicable PAW Distribution forms. The PAW Election Form indicates the number of months you want paid to you. The PAW Distribution Forms indicate how you want your payment made (i.e. lump sum payable to you, rolled over into an IRA, etc.). Q. When will I receive my PAW payment? A. As indicated in the retirement application packet, your PAW payment will be paid to you and/or your designated financial institution approximately three (3) months after the effective date of your retirement. All of your earnings and service must be reported to APERS and verified before the PAW payment can be issued. Q. What about the taxes on the lump-sum payment? A. Unless told otherwise, APERS withholds twenty percent (20%) for federal taxes and five percent (5%) for state taxes. Q. What happens if I die before I review my PAW payment? A. The deceased member s PAW lump sum may or may not be recalculated, depending on the Benefit Option chosen when the member chose to receive a PAW. Any annuity and PAW distribution to be paid will be made to eligible survivors and/or designated beneficiaries. Cost-of Living Increases AFTER RETIREMENT Retirees (including participants of the Deferred Retirement Option Plan (DROP)) receive an annual 3 percent cost-of-living increase in their retirement benefit on July 1 of each year once they have been retired or participated in the DROP for twelve months. Q. Will my monthly benefits ever increase? A. Yes. Your APERS benefit will increase 3% annually for the Cost of Living Adjustment (COLA). The increases are paid each July 1 to those who have been retired for at least 12 full months. Reemployment After Retirement After retiring from APERS, a retiree can work for any private employer, for any public employer or for any employer in another state, without affecting his or her APERS benefits. 36 37